BP to merge Argentina unit with CNOOC-backed local player

BP Plc announced plans on September 11th to merge its Argentinian operations with a local energy player, which is 50% owned by China National Offshore Oil Corp Ltd (CNOOC), in a cash-free deal. The UK energy giant will create an equal joint venture combining its local upstream unit, Pan American Energy LLC (PAE), with Axion Energy Argentina SA, the downstream business of Argentina's Bridas Corp. Bridas controls a 40% stake in PAE.

The new entity, Pan American Energy Group (PAEG), will become Argentina's largest privately-owned integrated energy company. PAEG will combine PAE and Axion's businesses in at least four Latin American countries. PAE reported output of 262,000 barrels of oil equivalent/day in 2016—18% of the national total. Meanwhile, Axion Energy owns 90,000 barrels/day of refining capacity in Argentina, along with over 750 retail sites in Argentina, Uruguay and Paraguay.

Axion already refines a chunk of PAE's crude oil production. The combination, subject to regulatory approvals, is expected to complete in early 2018. PAEG expects to benefit from cost reduction and better employment of resources following the merger. BP hopes that the restructuring will help it expand its upstream activities in Latin America, namely Argentina's vast Vaca Muerta shale field, while also increasing its fuels sales in the region.